WhatsApp says it will add voice calling capability in the second quarter of this year, according to Jan Koum, WhatsApp CEO.
That will create a “Skype style” over the app voice and messaging firm with more than 450 million users globally. Most observers would agree WhatsApp is headed for perhaps a billion users over the next several years, as it currently is adding about a million users a day.
WhatsApp already had become a direct competitor for mobile messaging. Now WhatsApp will put more pressure on carrier voice as well.
The larger observation might well be that fears service providers have had about competition from application and device suppliers has indeed emerged, across many parts of the mobile and telecom ecosystem.
For at least a decade, observers of the telecom business have speculated about how and when application providers would become “telecom service providers.”
In some cases, that competition is direct, in other cases primarily indirect. For WhatsApp, voice likely will be a feature, not a direct revenue-generating service. On the other hand, such indirect forms of product substitution illustrate the fundamental dynamics of a loosely-coupled application ecosystem on suppliers of historically tightly-coupled communications and content services.
One might reasonably disagree about the impact of over the top apps on markets for voice or messaging. To some extent, such apps displace use of existing voice and messaging. In other cases, OTT apps stimulate usage by people who would not otherwise have communicated or shared.
In other words, OTT apps both displace legacy app use, and stimulate new behavior that would not otherwise have happened. WhatsApp now will displace both voice and messaging volumes and revenues.
The WhatsApp challenge is only part of a bigger trend, of course. One of the clearest implications of a loosely-coupled Internet ecosystem is that all apps become disaggregated from “access.”
The primary implication for legacy service providers is that apps such as voice and data become products “anybody” can create and deliver, potentially shifting the “service provider” value away from such apps and towards an “access provider” role. That is the origin of the fear about service providers becoming “dumb pipes.”
At a strategic level, that is inevitable. It is not that legacy service providers cannot create new apps to sell. They can. But those businesses are more or less disaggregated from the core access function. Of course, even the access function is threatened by the likes of Google Fiber.
The point is that virtually every revenue stream traditionally supporting cable, satellite and telco service providers is threatened.
From time to time, the perceived dangerous competitors shift. “Skype” was the perceived danger to voice revenues.
WhatsApp is the latest perceived threat to mobile messaging revenues. Google has been seen as the threat to voice or Internet access revenues.
Fon and municipal Wi-Fi likewise have seen as competitors to service provider high-speed access services, or potentially to the mobile network.
From time to time, in other parts of the business, Google, Amazon or Microsoft have been seen as competitors to traditional handset and device suppliers.
Some also have speculated about whether Apple, Google, Facebook or others might actually decide to become mobile service providers.
In the mobile payments business, eBay (PayPal), Square, Google, Starbucks and others stand as competitors in that business.
The point is that every legacy communications service provider product, and virtually all new potential lines of business, have “non-traditional” competition.
In the video entertainment business, Netflix has been viewed as a challenger to traditional cable TV, satellite TV and telco TV businesses, on one hand, or as a burgeoning programming network that challenges HBO.
As time goes by, many of those potential areas of competition have become realities. Google Fiber now is emerging as a significant competitor to cable and telco high-speed access and video entertainment services.
Fundamentally, all legacy service providers are being recast as “access providers” who also own and operate some application businesses. That is the essential content of the observation that broadband access revenues drive service provider growth, or that service providers are in danger of becoming “dumb pipes.”
Telcos and cable companies already create and sell applications that are conceptually divorced from a tightly-integrated bundle that includes access. In the future, that will be even clearer.